FY 2015 Results Presentation New York, April 11 th 2016 Agenda - - PowerPoint PPT Presentation

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FY 2015 Results Presentation New York, April 11 th 2016 Agenda - - PowerPoint PPT Presentation

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FY 2015 Results Presentation New York, April 11 th 2016 Agenda Presentation 11:00am 11:45am Carlo Mazzi - Chairman 2015 Overview Alessandra Cozzani - Group CFO 2015 Financial Review Stefano Cantino - Group Strategic Marketing Director

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FY 2015 Results Presentation

New York, April 11th 2016

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1 FY 2015 Results Presentation – April 11th 2016

Presentation 11:00am – 11:45am Q&A Session 11:45am – 12:30pm Light Lunch 12:30pm – 1:30pm Carlo Mazzi - Chairman

  • 2015 Overview

Alessandra Cozzani - Group CFO

  • 2015 Financial Review

Stefano Cantino - Group Strategic Marketing Director

  • Building up a customer centric culture

Agenda

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2 FY 2015 Results Presentation – April 11th 2016

2015 Overview

OPERATING RESULTS

Gross margin strong to 72,4% EBIT to € 503 mn, 14,2% on Revenues Net Result to € 331 mn, 9,3% on Revenues

TURNOVER

Total Revenues to € 3,548 mn in FY-2015, in line with the previous year:

  • Retail channel (86% on sales) up 3% (-5% at constant FX)
  • Wholesale channel down 17% (-21% at constant FX) due to persistent rationalization strategy
  • Royalties up +14%

By region:

  • Positive organic growth in Europe and Japan
  • Asia Pacific weighed on trends
  • US weakened in H2

By brands / category:

  • Prada trend driven by favourable FX
  • Miu Miu overall positive organically during the period
  • Church’s over-performed driven by positive SSSG
  • Leather goods still underperforming
  • Double digit organic performance in footwear and resilience in RTW

RETAIL TRENDS

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3 FY 2015 Results Presentation – April 11th 2016

2015 Financial Review

Alessandra Cozzani

Group CFO

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4 FY 2015 Results Presentation – April 11th 2016

Net Sales by Channel (€ mn) – Full Year

2014 2015

% change as reported % change same FX

Retail 2,980.9 85% 3,059.7 87% +3%

  • 5%

Wholesale 532.5 15% 444.6 13%

  • 17%
  • 21%

Total 3,513.4 100% 3,504.3 100%

  • 8%

Retail

  • +3% reported driven by FX tailwind
  • -5% at constant exchange rates: negative SSSG in Asia and US, positive in Europe and Japan

Wholesale  -17% reported (-21% at constant FX), as a result of:

  • persistent selective strategy of wholesale partners, notably in Europe
  • weakness in duty-free channel in Korea mainly due to Mers outburst
  • High-single-digit positive organic performance in US market in Q4 as a result of a good reception from the S/S 2016 collection
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5 FY 2015 Results Presentation – April 11th 2016

2014 2015

% change as reported % change same FX

Retail Europe 999.6 34% 1,058.6 35% +6% +5% Americas 391.2 13% 410.8 13% +5%

  • 9%

Far East 1,130.2 38% 1,080.0 35%

  • 4%
  • 16%

Greater China(*) 769.7 26% 705.8 23%

  • 8%
  • 22%

Japan (**) 364.8 12% 403.7 13% +11% +4% Middle East 92.9 3% 103.5 3% +12%

  • 5%

Others 2.2

  • 3.1
  • +41%

+42% Total Retail 2,980.9 85% 3,059.7 87% +3%

  • 5%

Wholesale 532.5 15% 444.6 13%

  • 17%
  • 21%

Total Sales 3,513.4 100% 3,504.3 100%

  • 8%

Note(*): PRC, HK, Macau Note(**): Japan and Hawaii

Europe – positive organic growth driven by tourism, albeit slowing in Q4 due to terrorists attacks in France Americas – US underlying trends impacted by strong USD, resulting in less tourism and shift of local consumption in other shopping destinations; North American customers were broadly flat in the period Double digit organic growth in Brazil and Mexico in both Q3 and Q4 Asia Pacific – difficulty in most markets, affected by pricing differentials and Chinese stock market volatility; HK and Macau still impacted by very low footfall Japan – positive organic growth throughout the year, sustained by tourism, mainly Chinese Middle East – Dubai suffering from lower tourism; Middle Eastern customers overall largely positive worldwide throughout the year

Net Sales by Geography (€ mn) – Full Year

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6 FY 2015 Results Presentation – April 11th 2016

2014 2015

% change as reported % change same FX

Prada 2,463.2 83% 2,487.6 81% +1%

  • 7%

Miu Miu 455.0 15% 501.7 16% +10% +1% Church’s 49.0 2% 56.2 2% +15% +7% Other 13.8

  • 14.2
  • +4%

+2% Total Retail 2,980.9 85% 3,059.7 87% +3%

  • 5%

Total Wholesale 532.5 15% 444.6 13%

  • 17%
  • 21%

Total 3,513.4 100% 3,504.3 100%

  • 8%

Prada  Positive organic trends in Europe and Japan and weakness in Asia Pacific (mainly in HK and Macau) and US Miu Miu  Positive underlying growth sustained particularly by strong performances in Europe, Middle East and Mainland China Church’s  Very good retail performance in the period, benefitting from higher exposure to Europe  High single digit SSSG in the year

Net Sales by Brand (€ mn) – Full Year

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7 FY 2015 Results Presentation – April 11th 2016

2014 2015

% change as reported % change same FX

Leather Goods 1,965.6 66% 1,919.9 63%

  • 2%
  • 10%

Footwear 448.7 15% 537.5 18% +20% +11% Ready to Wear 512.3 17% 541.6 18% +6%

  • 3%

Others 54.3 2% 60.7 2% +12% +4% Total Retail 2,980.9 85% 3,059.7 87% +3%

  • 5%

Total Wholesale 532.5 15% 444.6 13%

  • 17%
  • 21%

Total 3,513.4 100% 3,504.3 100%

  • 8%

Leather goods business impacted by contrasting trends across regions  Positive organic growth in Europe and Japan during the period  Negative trend in Asia Pacific and US Continued strength of Footwear across all brands, still growing in Q3 and Q4 after six consecutive quarters of double-digit organic growth Resilient performance in Ready-to-wear, improving in Q4 as a result of a very good reception from the Prada women F/W collection

Net Sales by Product (€ mn) – Full Year

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8 FY 2015 Results Presentation – April 11th 2016

€ mn 2015 2014 Net Sales 3.504,3 98,8% 3.513,4 98,9% Royalties 43,4 1,2% 38,3 1,1% Net Revenues 3.547,8 100,0% 3.551,7 100,0% COGS (980,2) 27,6% (1.001,1) 28,2% Gross Margin 2.567,6 72,4% 2.550,6 71,8% Product Development (134,3) 3,8% (132,6) 3,7% Advertising & Promotion (191,7) 5,4% (170,6) 4,8% Selling (1.517,4) 42,8% (1.340,8) 37,8% G&A (221,3) 6,2% (205,0) 5,8% EBIT 502,9 14,2% 701,6 19,8% Net Financial Income (Expenses) (27,5) 0,8% (34,0) 1,0% Income Taxes (142,0) 4,0% (208,5) 5,9% Net Income 333,4 9,4% 459,5 12,9% Minority Income 2,4 0,1% 8,5 0,2% Group Net income 330,9 9,3% 451,0 12,7% D&A 299,9 8,5% 252,7 7,1% EBITDA 802,8 22,6% 954,3 26,9%

Group Profit and Loss – Full Year

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9 FY 2015 Results Presentation – April 11th 2016

EBIT Development – Full Year

2014 GM Selling A&P G&A P&D 2015

Negative change Positive change

19.8%

  • 5.0%

+0,6%

  • 0.1%
  • 0.5%

14.2%

  • 0,6%

 Gross Margin improvement mainly driven by supply chain efficiencies, largely offsetting unfavourable category / geographic mix  Higher incidence of selling expenses affected by negative SSSG and higher fixed costs, due to retail network expansion  € 9 mn one-off expenses included in G&A weighed 90 bps dilution on EBIT margin in Q4

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10 FY 2015 Results Presentation – April 11th 2016

261 175 189 162 450 337 2014 2015

Corporate & Industrial Retail Retail capex in 2015 includes 22 net openings, 20 relocations and 11 renovations 2015 Corporate & Industrial capex includes 2 new industrial facilities:

  • Leather goods factory in Tuscany, Italy
  • Tannerie Hervy in Limoges, France

Capex (€ mn) – Full Year

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11 FY 2015 Results Presentation – April 11th 2016

Retail Overview - 618 Dos at January 31st, 2016 (*)

22 Net openings

NORTH AMERICA & MEXICO: 106 (+7) EUROPE: 167 ITALY: 54 (+1) ASIA (EX-JAPAN): 183 (+8) JAPAN: 74 (+4) MIDDLE EAST: 21 (+4) SOUTH AMERICA: 11 AFRICA: 2 (-2)

(*) including 2 Marchesi shops in Italy

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12 FY 2015 Results Presentation – April 11th 2016

NFP Jan-15 Net Income Net Operating Working Capital D&A Capex Dividends Others NFP Jan-16

333 189 (115) (102) 300 (390)* (285)

NFP Jan-16 Other

(160)

* including payment of payables for capex 2014 (headquarter office in Milan) Negative change Positive change

Net Financial Position (€ mn)

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13 FY 2015 Results Presentation – April 11th 2016

Strong Balance Sheet (€ mn)

2015 2014 Non-current assets 2,587 2,557 Net operating working capital 665 563 Other current assets / (liabilities), net 26 (222) Other non-current assets / (liabilities), net (66) (69) Net invested capital 3,212 2,829 Total consolidated shareholders' equity 3,097 3,018 Net financial position (surplus) / deficit 115 (189) Total 3,212 2,829

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14 FY 2015 Results Presentation – April 11th 2016

Dividend Payout (in %)

128 230 281 281 281

2011 2012 2013 2014 2015

Dividend Per Shares (in €)

30% 37% 45% 62% 0,11 0,09 0,05 0,11 85% 0,11

Dividend Policy (€ mn)

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15 FY 2015 Results Presentation – April 11th 2016

Building up a customer centric culture

Stefano Cantino

Group Strategic Marketing Director

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16 FY 2015 Results Presentation – April 11th 2016

COMMUNICATION

TARGETING A GLOBAL AUDIENCE

CHANNEL

LEVERAGING ON OUR BEST IN CLASS DISTRIBUTION NETWORK

PRODUCTS

MEETING MARKET EXPECTATIONS WHILE PRESERVING OUR UNIQUE IDENTITY

Building up a customer centric culture

EXPERIENCE

TAILORED ATTENTION TO CUSTOMER EXPERIENCE BY PROVIDING OUTSTANDING SERVICES

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17 FY 2015 Results Presentation – April 11th 2016

CHANNEL Leveraging on our best in class distribution network

RETAIL

  • Retail network optimization
  • rationalize in store space
  • selective closures
  • Store concept evolution at Miu Miu
  • Continuous research of market opportunities
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18 FY 2015 Results Presentation – April 11th 2016

CHANNEL Leveraging on our best in class distribution network

WHOLESALE

  • Rationalization strategy nearly completed
  • Further development of relationships with strategic key accounts
  • Business agreements with leading e-tailers
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19 FY 2015 Results Presentation – April 11th 2016

CHANNEL Leveraging on our best in class distribution network

LICENSING

  • Keep growth momentum in eyewear at both

Prada and Miu Miu

  • Successful launch of the new Miu Miu fragrance
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20 FY 2015 Results Presentation – April 11th 2016

CHANNEL Leveraging on our best in class distribution network

E-COMMERCE

  • Set in-house operations across all brands to develop CRM and e-shopping experience
  • Development plan: extend categories and expand in new countries
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21 FY 2015 Results Presentation – April 11th 2016

  • Relentless focus on innovation and quality: leveraging on our design leadership
  • Optimize the leather goods portfolio: strengthen all strategic prices ranges to cover any customer

expectations

  • Strong focus on both local customers and tourists:
  • Merchandising mix differentiation among regions and stores
  • Price harmonization across countries
  • Reduce time to market: “see now buy now” special projects
  • Development of more versatile collections at Miu Miu
  • New merchandising mix focused on luxury lifestyle aligned with current market expectations

PRODUCTS Meeting market expectations while preserving our unique identity

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22 FY 2015 Results Presentation – April 11th 2016

PRODUCTS Pricing harmonization

Prada Arcade bag

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23 FY 2015 Results Presentation – April 11th 2016

PRODUCTS See now buy now

SEE NOW BUY NOW February 2016 – An avant-première of the Pionnière and Cahier bags, starred at the Prada F/W 16 fashion show; both models were immediately available, in limited edition, in Milan, Paris, London and New York Prada stores

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24 FY 2015 Results Presentation – April 11th 2016

  • Embracing Digital Communication
  • Innovative communication projects leveraging on new platforms
  • Revisited communication approach for Miu Miu brand:

new styling for fashion shows and advertising

  • Fondazione Prada: brand’s “DNA” strong reference to culture

COMMUNICATION Targeting a global audience

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25 FY 2015 Results Presentation – April 11th 2016

COMMUNICATION Embracing digital communication

INCREASING FOCUS ON SOCIAL MEDIA AND DIGITAL COMMUNICATION  In 2015 both Prada and Miu Miu have been active with special projects dedicated to Social Media achieving remarkable increase in fan base growth and engagement  Reached 6.9 mn fans on Instagram in 2015 (+4.3 mn, + 167% growth yoy)  Social media projects to be further enhanced in 2016  Focus on China: Activated social platform Sina Weibo on February 2016

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26 FY 2015 Results Presentation – April 11th 2016

COMMUNICATION Embracing digital communication

INCREASING FOCUS ON SOCIAL MEDIA AND DIGITAL COMMUNICATION  On Febuary 2016 Prada came out on top during Milan Fashion Week: it was the most engaging brand

  • n Instagram with 515,000 interactions in one day reaching 7.2 mn followers (source: Blogmeter)

 Prada was the 5th Instagram profile in terms of increasing traffic among luxury brands in February 2016 (source: Stylophane)

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27 FY 2015 Results Presentation – April 11th 2016

Developed by Miu Miu for IOS, Android and Windows devices, the Miu Miusic app has been launched in February 2016. The project is aimed to engage Miu Miu and music lovers in an exclusive experience, allowing users to create their personal videoclips by combining music tracks and original graphics and share them on their favourite social media. Two artistic worlds – the music created exclusively by DJ Frederic Sanchez and a set of distinctive Miu Miu graphics – are brought together with unique, highly personal video contents, different every time. New releases are planned in 2016 involving new artists and visuals consistent with the new Miu Miu collections. New features will include the possibility to shop selected online key items. MIU MIUSIC - THE NEW FASHION APP

COMMUNICATION Embracing digital communication

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28 FY 2015 Results Presentation – April 11th 2016

THE POSTMAN DREAMS - a humorous series of five shorts captured by Autumn de Wilde, one of America’s most imaginative filmmakers, starring the Prada Galleria bag, released for one-month period to keep momentum and expectations high

COMMUNICATION Innovative communication projects

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29 FY 2015 Results Presentation – April 11th 2016

REAL FANTASIES - video created by AMO, the design and research division of the OMA architecture studio, to present the Prada Men’s and Women’s Collections. The video provides a graphical reinterpretation of the Indefinite Hangar, the space designed for the Spring/Summer 2016 fashion shows, where spectators experienced a sensation of continuity between the ceiling and floor, thus blurring the boundaries between the catwalk and the public.

COMMUNICATION Innovative communication projects

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30 FY 2015 Results Presentation – April 11th 2016

MIU MIU WOMEN’S TALES - a series of short films created by renowned international contemporary female directors, inspired by Miu Miu to celebrate and interpret the concept of femininity: an innovative vision consistent with Miu Miu’s avant-garde identity.

COMMUNICATION Innovative communication projects

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31 FY 2015 Results Presentation – April 11th 2016

COMMUNICATION Fondazione Prada

FONDAZIONE PRADA expresses the strong connection between Prada and the world of art and culture. It contributes to communicate Prada’s essence and the DNA. More than 3000 free editorials pages in 2015.

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32 FY 2015 Results Presentation – April 11th 2016

One of the key pillars of the Prada Group’s 2016 strategy is the strengthening of our relationship with existing and aspirational clients, including millennials:

  • An highly innovative “Digital Retail

Project”: a comprehensive view of our customers

  • One-to-one digital marketing: “Prada

Monkey Chatter”, “Miu Miu Rouge

  • bsession”…
  • Tailored services: made-to-order, local

delivering, trunk shows…

  • In-store marketing events: private

fashion shows, special events…

EXPERIENCE Tailored attention to customer experience by providing outstanding services

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33 FY 2015 Results Presentation – April 11th 2016

With the aim to increase retention and loyalty by providing personalized services and tailored product offer across different client segments and markets, the Group launched the «Digital Retail Project» The project allows:

  • Store managers to have full access to relevant information in order to have deeper customer insights and

develop personalized metrics

  • Clients to have access to exclusive contents (advertising campaigns, special projects, new product

releases, exclusive fashion show, back stage materials on a one-to-one approach)

EXPERIENCE Digital Retail Project a comprehensive view of our customers

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34 FY 2015 Results Presentation – April 11th 2016

THE MONKEY CHATTER February 2016 – Launch of an exclusive collection of women’s and men’s bags, footwear, accessories and iconic trick charms, to honour the Chinese New Year

EXPERIENCE One-to-one digital marketing

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35 FY 2015 Results Presentation – April 11th 2016

Miu Miu capsule collection inspired by its affinity with the astrological sign after which the Chinese New Year is named ROUGE OBSESSION

EXPERIENCE One-to-one digital marketing

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36 FY 2015 Results Presentation – April 11th 2016

PRADA: MADE-TO-ORDER DÉCOLLETÉ

EXPERIENCE Made-to-Order

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37 FY 2015 Results Presentation – April 11th 2016

RIPPLE EFFECT WALLPAPER An undulating landscape of color, shadow, curves and geometries that disturbs the planar wall surface

EXPERIENCE In-store marketing

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38 FY 2015 Results Presentation – April 11th 2016

APPENDIX

Appendix

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39 FY 2015 Results Presentation – April 11th 2016

2014 2015

% change as reported % change same FX

Retail 809.2 82% 806.3 84%

  • 6%

Wholesale 181.1 18% 149.0 16%

  • 18%
  • 21%

Total 990.3 100% 955.3 100%

  • 4%
  • 9%

Net Sales by Channel (€ mn) – 4th Quarter

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40 FY 2015 Results Presentation – April 11th 2016

2014 2015

% change as reported % change same FX

Retail Europe 248.6 31% 242.7 30%

  • 2%
  • 3%

Americas 120.5 15% 117.0 15%

  • 3%
  • 10%

Far East 305.7 38% 295.6 37%

  • 3%
  • 10%

Greater China(*) 203.5 25% 189.4 23%

  • 7%
  • 16%

Japan (**) 107.7 13% 120.0 15% +11% +2% Middle East 26.0 3% 30.1 4% +16% +3% Others 0.7

  • 0.9
  • +32%

+46% Total Retail 809.2 82% 806.3 84%

  • 6%

Wholesale 181.1 18% 149.0 16%

  • 18%
  • 21%

Total Sales 990.3 100% 955.3 100%

  • 4%
  • 9%

Note(*): PRC, HK, Macau Note(**): Japan and Hawaii

Net Sales by Geography (€ mn) – 4th Quarter

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41 FY 2015 Results Presentation – April 11th 2016

2014 2015

% change as reported % change same FX

Prada 663.7 82% 651.1 81%

  • 2%
  • 8%

Miu Miu 125.4 15% 133.3 17% +6%

  • Church’s

15.6 2% 16.9 2% +8% +3% Other 4.5

  • 4.9
  • +9%

+8% Total Retail 809.2 82% 806.3 84%

  • 6%

Total Wholesale 181.1 18% 149.0 16%

  • 18%
  • 21%

Total 990.3 100% 955.3 100%

  • 4%
  • 9%

Net Sales by Brand (€ mn) – 4th Quarter

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42 FY 2015 Results Presentation – April 11th 2016

2014 2015

% change as reported % change same FX

Leather Goods 518.9 64% 493.7 61%

  • 5%
  • 10%

Footwear 125.5 16% 137.8 17% +10% +4% Ready to Wear 153.1 19% 161.9 20% +6%

  • 1%

Others 11.7 1% 12.9 2% +11% +8% Total Retail 809.2 82% 806.3 84%

  • 6%

Total Wholesale 181.1 18% 149.0 16%

  • 18%
  • 21%

Total 990.3 100% 955.3 100%

  • 4%
  • 9%

Net Sales by Product (€ mn) – 4th Quarter

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43 FY 2015 Results Presentation – April 11th 2016

Italy 13% Europe 22% America 13% Japan 13% Asia Pacific 35% Middle East 3%

FY 2014 Europe America Japan Asia Pacific Middle East Wholesale Fx Impact FY 2015 Retail: -5% at constant exchange rate

  • 9%

+4% +5%

  • 5%
  • 21%
  • 16%

+7% 3,513 3,513 3,504 Negative change Positive change

Group Net Sales by Region/Channel (€ mn) – Full Year

0% as reported / -8% same fx

Region breakdown for retail only

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44 FY 2015 Results Presentation – April 11th 2016

Italy 12% Europe 22% America 15% Japan 13% Asia Pacific 35% Middle East 3%

2.895 2.841

FY 2014 Retail Wholesale Fx Impact FY 2015

  • 7%
  • 23%

+7%

Region breakdown for retail only

Negative change Positive change

Prada – Total Net Sales by Channel (€ mn) – Full Year

  • 2% as reported / -9% same fx
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45 FY 2015 Results Presentation – April 11th 2016

Italy 12% Europe 18% America 9% Japan 16% Asia Pacific 38% Middle East 6%

519 527

Region breakdown for retail only

527

FY 2014 Retail Wholesale Fx Impact FY 2015

564 +1%

  • 17%

+8% Negative change Positive change

Miu Miu – Total Net Sales by Channel (€ mn) – Full Year

+7% as reported / -1% same fx

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Q&A SESSION